NCPA - National Center for Policy Analysis


May 25, 2010

For the fourth time this year, doctors face a potential huge cut in the fees that the government pays them to treat Medicare patients. 

Physicians will be hit with a 21 percent cut in Medicare reimbursements as of June 1 unless lawmakers decide to patch over the issue -- as they've done for years.  Congress is now debating the matter, and to stop the cut lawmakers would have to vote to pass a new patch sometime in the next two weeks, says 

  • If the proposed cuts go through, physicians are worried their practices will be so strapped that they'll have to drop some of the 43 million Americans who are covered under Medicare.
  • But, of course, on the other side of the issue is cost to the government at a time when the federal budget is tight. 

"The current formula is absolutely broken," said James Rohack, president of the American Medical Association (AMA).  "Congress is in a hole, and instead of climbing out they keep digging deeper." 

  • Federal law currently requires that the payment rates for doctors who accept Medicare be adjusted annually based on a formula that's tied to the health of the economy.
  • That formula was established in 1997, and the law says rates should be cut every year to keep Medicare in the black.
  • But Congress has blocked those cuts in seven of the last eight years, setting up nine temporary patches often referred to as the "doc fix" -- three of which were in 2010 alone. 

Of course, delaying cuts merely kicks an existing problem down the road. 

  • One possible outcome of the congressional wrangling is a five year delay in the 21 percent cut in Medicare fees.
  • That option, the most discussed so far, would cost about $80 billion.
  • That spending would be exempt from a "pay-as-you-go" law enacted in February that requires lawmakers to find ways to offset certain spending increases or tax cuts.
  • Other options include delaying cuts by a fewer number of years, but at higher reimbursement rates, provided that the cost is capped at $80 billion. 

But the AMA's Rohack says he wants "a new formula that actually reflects the true cost of care." Lawmakers counter that repealing the current setup would cost $210 billion over 10 years. 

Source: Julianne Pepitone, "Doctors' Medicare payouts to be cut 21 percent June 1,", May 17, 2010.

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